Legal Paper Breaks Down Mississippi NFIP Suit

The federal court in Gulfport, Miss., may consider staying aspects of the planned National Flood Insurance Program rate hikes imposed by a 2012 law until the litigation is resolved or affordability studies are concluded, a senior research attorney at the University of Mississippi concluded in a new paper.

The court may find less flexibility to alter certain changes mandated by the law, the Biggert-Waters Act of 2012, such as the issuance of new policies at full-risk rates, the analysis states. This particular change has been cited as an impediment to housing sales, the paper notes.

Niki Pace, an adjunct professor with the Mississippi-Alabama Sea Grant Legal Program, based at the University of Mississippi Law School, said her analysis is contingent on the court ruling in favor of the states that brought the suit on several procedural issues. Her analysis was first published Thursday on Law360.

The suit was filed in October by the Mississippi Insurance Department. It is now being supported through friends of the court briefs by Florida, Louisiana, Alabama, South Carolina and Massachusetts.

Michael Chaney, Mississippi insurance commissioner, said he remains optimistic that the court will consider the potentially devastating impact of implementation of B-W on individual homeowners as well as the nascent recovery of real-estate markets in making a decision.

In comments on the Senate floor last Thursday about legislation that some in Congress say would junk the 2012 law that mandated that National Flood Insurance Program customers be charged actuarial rates, Sen. Mary Landrieu (D-La.) said, “We better wake up and realize the economic impact this is going to have on the entire country if this is not fixed. This is not about millionaires on a beach.

“This is about the middle class and working hard where you need to live to work,” Landrieu said, citing the seafood, energy and shipping industries.

Landrieu made her comments in disclosing that the Senate has agreed to consider legislation delaying the rate hikes early next year.

Pace notes in her paper that “this litigation is only one piece of a multifaceted effort to reform the ‘reforms’” imposed by the law, the Biggert-Waters Act. She acknowledges that, “Congressional intervention may be the best long-term solution.”

The Federal Emergency Management Agency, which administers the NFIP, contends that the states lack standing to sue because the legislation is a direct federal action.

Pace said, “FEMA has argued that MID does not meet Article III standing requirements, in its individual capacity or on behalf of its citizens under parens patriae, because the state has neither established the requisite injury in fact nor shown that its claims are redressable by the court in the event of a favorable ruling.

“Under parens patriae, the state is acting in its quasi-sovereign capacity and suing on behalf of its citizens as a whole.”

Next Page: FEMA Says Suit Flawed

FEMA also contends in a brief that the suit is fundamentally flawed because Mississippi is wrong in stating that the affordability report must be sent to Congress before the rates are implemented, stating the two issues are fundamentally unrelated.

Pace said for MID to succeed, it must show that FEMA “failed to take a discrete agency action that it was required to take.”

She said this standard prevents courts from reviewing broad programmatic attacks against agency action and limits the court’s ability to mandate a particular type of action, leaving the means of accomplishing the act to the agency’s discretion.

In this case, Pace said, the affordability study required by a provision of B-W specifies that FEMA will contract with the National Academy of Sciences (NAS) to conduct the study for a maximum cost of $750,000.

NAS was unable to comply with the time and funding constraints; it proposed a two-phase approach, FEMA said in its brief because sufficient funds to pay for the study were not appropriated.

Pace said FEMA anticipates phase one will be complete in March 2015. “The state parties argue that FEMA’s advancement of the rate increases without the full benefit of the affordability analysis was an arbitrary and capricious decision,” Pace said.

Pace said that, through its briefs, Mississippi has responded with a detailed assertion of standing both in its own capacity and on behalf of the citizens of Mississippi under the doctrine of parens patriae.

As to parens patriae standing, MID strived to clarify in its briefs that it is not seeking to “protect its citizens from the operation of a federal statute,” but rather, is seeking to enhance the operation of a federal program by compelling FEMA to enforce B-W, Pace said.